Technical Overview

• Euro Test Water Below 1.2000
• Japanese Yen Eyes 115.00
• Australian Dollar Heads Toward .7500

Market Outlook
Dollar bulls once again came out on top and continued to push the majors across the board, taking back the territory lost during the previous retrace. As dollar longs remain in control of the price action, a break of the key levels will most likely add confirmation that the new dollar dominated trend that will likely take the majors to the levels not seen since 2003.

1-Day Currency Pair Outlook

EUR/USD - Euro bulls were in full retreat after failing to stave off the rising tide of the dollar advance as greenback bulls pushed the pair against the psychologically important 1.2000 handle. As the price action reaches a critical stage, a decisive attack by the dollar bulls will most likely see the euro longs surrender their defensive positions at 1.1982, a July 26 daily low and retreat toward the 1.1876, a defensive position established by the 2005 Low. A break of the current 2005 low at 1.1876 will most likely see the single currency surrender further ground to the greenback as it would confirm a dollar dominated trend and see the pair head toward the next major level at 1.1760, a 2004 Low and a gateway to the psychologically important 1.1500 handle. Indicators are favoring the dollar bulls with both momentum indicator and MACD below the zero line, while extremely oversold Stochastic adds to a trending outlook as most prolonged moves to the downside happened after oscillators became oversold.

Key Levels & Technical Indicators

USD/JPY - Japanese Yen longs found themselves on the wrong side of the dollar advance as greenback longs decisively pushed the pair above the 112.50 level that confined the pair within a trading range for the past few months. A sustained breakout will most likely see the greenback bulls break through the yen defenses around 112.98, a level marked by the July 19 daily high. A sustained move to the upside will most likely see the dollar longs push the pair toward the 113.68, a 2005 high and a gateway to the psychologically important 115.00 handle, which is currently defended by the 114.92, a 2004 high. Indicators are supporting dollar longs with both momentum indicator and MACD treading above the zero line, while overbought Stochastic most likely acts as a confirmation for the possible trend that started around the 109.00 handle.  

Key Levels & Technical Indicators

GBP/USD - British pound bulls once again received a fair share of pounding at the hands of the invading dollar longs as retreat by the cable bulls turned into a full blown stampede with the pair falling below the 1.7700 level during another bout of the dollar bullishness. As greenback longs continue to reassert their dominance over the previously conquered territory, a move below the   1.7617, July 21 daily low, will most likely see a further collapse of the and see the pair head below the psychologically important 1.7500 figure. A sustained breakout below the 1.7500 figure will most likely see the greenback longs take on the pound defenses around 1.7417, a level marked by the July 26 daily high. A further move by the dollar bulls will most likely see the cable's last stand at 1.7284, a 2005 low and a gateway to the psychologically important 1.7000 figure, with collapse of a figure of such magnitude will most likely see the pound give up further ground with next level of effective defenses seen around the 1.6300-1.6500 zone. Indicators favor the dollar bulls with momentum indicator and MACD below the zero line, while oversold Stochastic adds to the out look that the price action will most likely remain on the side of the dollar longs.

Key Levels & Technical Indicators

USD/CHF - Swiss Franc longs were in full retreat after their hopes and dreams of retaking the 1.2900 figure were trampled by advancing greenback bulls. As dollar longs continue to make their way deeper into the Swissie held territory a further move above the 1.2900 figure will most likely see the pair break above the psychologically important 1.3000 figure and see the greenback longs take on the Swiss Franc defenses around 1.3081,a level marked by the 2005 High. A sustained break to the upside will most likely see the dollar longs push the pair toward the 1.3226, a CHF defensive position established by the April 26, 2004 daily high. Indicators continue to favor dollar longs with both momentum indicator and MACD above the zero line. Stochastic remains extremely oversold thus adding to the trending market outlook.

Key Levels & Technical Indicators

USD/CAD - Canadian dollar bulls once again managed to hold back the advancing US dollar counterpart as the price action remained below the 1.1800 figure. As greenback longs launch another offensive against the Loonie positions, a move to the upside will most likely see the pair head above the 1.1800 figure and break the initial CAD defenses at 1.1794, a level marked by the 20-day SMA. A further move to the upside will most likely see the US dollar push the pair against the Canadian dollar defenses around 1.1890, a level marked by the 23.6 Fib of the 1.2735-1.1629 CAD rally. A further move to the upside will most likely see the US dollar take on the CAD bulls around 1.1981, a level marked by the 50-day SMA, and with a further collapse of the Loonie defenses seeing the break above the psychologically important 1.2000 handle and take on the next round of Loonie defenses around 1.2051. a 38.2 Fib of the 1.2735-1.1629 CAD rally. Indicators continue to favor Canadian dollar bulls with both MACD and momentum indicator below the zero line, while neutral oscillators give US dollar longs enough room to maneuver.

Key Levels & Technical Indicators

AUD/USD - Australian dollar longs continued to migrate back towards south as the greenback longs decided that the Aussie has overstayed its welcome above the .7500 figure. As Australian dollar prepares for a long retreat, a move below the .7514, a level marked by the 23.6 Fib of the .7991-.7374 USD rally will most likely see the US dollar longs open the defenses around the psychologically important .7500 handle for collapse and most likely see the pair head toward the toward the .7457, an Aussie defensive position established by the August 31 daily low. A sustained momentum on the part of the greenback longs will most likely see the pair head toward the .7368, a 2005 low and a gateway to the next psychologically important level at .7000. Indicators are beginning to diverge with momentum indicator below the zero line while MACD is sloping downward toward the zero line. Stochastic became oversold, thus giving the Aussie longs a chance for a pullback.

Key Levels & Technical Indicators

NZD/USD - New Zealand dollar bulls lived up to the reputation that Kiwi's are flightless as the pair continued to tumble and landed hard on top of the .6800 figure. As greenback bulls land on top of the Kiwi longs, the next break to the downside will most likely see the pair head toward the NZD defenses around .6773, a July 28 daily low. A further break in the New Zealand dollar defenses will see the pair retreat toward the .6685, a critical level marked by the 2005 low, breaking of which will most likely see the pair test the NZD bids around .6591, a level marked by the September 1, 2004 daily high, which currently acts as a gateway toward the psychologically important .6500 handle, a level not seen in over a year. Indicators favoring the US dollar bulls with both momentum indicator and MACD below the zero line; with oversold Stochastic adding to the outlook that the prolonged movement to the downside is here to stay.

Key Levels & Technical Indicators

Sam Shenker is a Technical Currency Analyst for FXCM.